Using the Sandusky Scandal as a Case Study

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Presentation to Berks County Bench-Bar Conference April 2013

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Using the Sandusky Scandal as a Case Study

  1. 1. Using the Sandusky Scandal as a Case Study: Due DiligenceRequirements of Corporate Board Members in Profit andNon-Profit OrganizationsLarry Catá BackerW. Richard and Mary Eshelman Faculty Scholar & Professorof Law, Professor of International Affairs 2012-13 ChairUniversity Faculty Senate, Pennsylvania State UniversityRemarks to the Berks CountyBench-Bar Conference April17, 2013Reading Pennsylvania
  2. 2. Introduction and Context• Jerry Sandusky• Curley and Schultz• Spanier and Paterno• Board of Trustees• Freeh Group Report• NAACP
  3. 3. Fiduciary Duty Overview• Substantive Standard• Liability Standard• Business Judgment Rule– Rule of non interference– Rule of process• Entire fairness• Ratification
  4. 4. Governing the University• Faculty Control– Oxford• Direct State Control– Continental Europe; Asia• “Lay” Boards– U.S.• Who appoints (looking for shareholder substitutes)• Shared Governance
  5. 5. Diligence Obligations of theBoard• Recent cases– American– West Virginia– Illinois• Legal Framework– Model Non ProfitBusiness CorporationAct
  6. 6. Core Issues• Blindness to Risk– Board awareness of risk– Obligation to inform the board• Whistleblowing• Loyalty—Conflict of Interest– Ethics– Relational Conflict• Severance and Benefits– accountability
  7. 7. Application to Penn State
  8. 8. Questions?Thanks!!

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